Coach parent in $625 million yearly loss; accelerating turnaround

Tapestry reported a big annual loss but cheered investors with better-than-expected fourth-quarter results amid strong online sales.

The parent company of Coach, Kate Spade and Stuart Weitzman said it will reduce expenses and increase its focus on digital growth as part of a turnaround plan. Tapestry reported its results several weeks after its CEO, Jide Zeitlin, resigned amid allegations surfaced that he posed as a photographer in 2007 in order to lure a woman into a relationship. Former Abercrombie & Fitch executive Joanne Crevoiserat is serving as interim CEO. 

Tapestry said it will transform into a “leaner” company with a “digital-first” mindset and look to appeal to consumers in new ways to increase sales. The company estimated it will reduce expenses by about $300 million, including $200 million projected in fiscal 2021. 

Tapestry swung to a loss of $294 million, or $1.06 a share, in the quarter ended June 27, from income of $149 million, or $0.51 a share, in the year-ago period. The adjusted per-share loss came to $0.25, better than the $0.56 loss per share consensus of analysts. 

Net sales fell to $715 million from $1.51 billion, also better than expected. By brand, Coach sales fell 53%, Kate Spade sales dropped 51%, and Stuart Weitzman sales fell 61%. Online sales tripled during the quarter.

For the full year, Tapestry’s net sales totaled $4.96 billion compared to $6.03 billion in the prior year. Net loss for the year was $652 million compared to net income of $643 million in the prior year

“As we enter the new fiscal year, we are taking deliberate actions to lower promotional activity and increase AURs [average unit retail] across brands, resulting in gross margin expansion, while creating a scalable agile framework, notably through targeted reductions in SG&A, stated Crevoiserat. “These initiatives are designed to create a strong foundation for profitable expansion over our planning horizon. Therefore, assuming continued steady recovery as we emerge from the pandemic, we would expect a return to sustained topline growth in the second half of fiscal 2021, with bottom line growth in each of fiscal 2021, 2022 and 2023.”

Tapestry ended the quarter with $1.4 billion in cash and short-term investments, including $700 million drawn down on its revolver, and $1.58 billion in long-term debt. 

The company has 1,567 stores around the globe, including 958 Coach stores, 420 Kate Spade stores and 189 Stuart Weitzman stores.